finance

A flawed plan to raise student loan repayments


British politicians have often pointed with justification to the country’s weakness in vocational education as one of the biggest priorities for reform. An 1880s royal commission unfavourably contrasted the standard of education among “workmen” in England with that in Germany. While many reform attempts have flagged up the same concerns — inadequate provision, snobbery about manual work and a belief that a university education is the only route into the middle classes — few have succeeded in providing lasting solutions. A government plan to lower the salary threshold at which graduates today have to start repaying their student loans would only add to the list.

As the Financial Times reported, chancellor Rishi Sunak is considering changing the tuition fee loan system so that graduates would begin repaying their debts when they earn £23,000 rather than £27,295 at present. The move would save the government about £2bn a year; roughly half of students are forecast never to repay their loans, with debts written off after 30 years. This forecast is reflected in the public finances at the point the loan is made, with about half the value counted as government spending.

The proposal is also an attempt by the government, sceptical of the expansion in university education, to shrink the number of students getting little value from their courses. The 2019 Augar review of post-18 education proposed lowering the salary repayment threshold to £23,000, or median non-graduate earnings — as well as cutting tuition fees. The threshold would then reflect the principle that students should be expected to contribute from any benefit they get from their degree. That would also encourage would-be students to think more deeply about the value they are getting from their course: at present students and universities face little prospect of having to repay their loans if the course provides only minor benefits.

Applying this change retrospectively to graduates who completed their degrees under the current thresholds would be misguided and unfair. Those with existing loans cannot change past decisions they made about what course they did. Raising what is, in essence, an income tax may appeal to a Treasury that is keen to bring borrowing down after the expense of the pandemic, but would take more from not particularly high earners and the young who will soon have to pay the higher rate of national insurance, already brought in by the government.

Reforms to bolster further education, the oft-ignored counterpart to Britain’s universities, are nevertheless long overdue. Partly, this is to reverse a decade of budget cuts; the number of students attending such institutions has plummeted in recent years. So, too, has the number in apprenticeships, the main alternative to classroom-based learning. If the alternatives to a university education are seen as second best and inadequate, then solely raising the price of a degree will not discourage students. A poll by the Social Market Foundation found that while older generations favour vocational education over university education, the majority of those who actually have to make the choice, 18-24 year-olds, still prefer an academic path.

Britain’s politicians may have been trying to work out how to improve vocational education for over a century but a different approach is now called for to solve 21st-century problems. A more radical redefinition is needed of how to prepare students for an era when manual work may involve computing and the kind of fundamental skills, such as creativity and problem solving, that employers value the most.



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